Roadshow: A repeal in 2010 causes an annual adjustment in July each year

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A customer pumps gas into his SUV at the Shell gas station on El Camino Real and 5th Avenue in North Fair Oaks on Friday, Oct. 5, 2012. Gas prices jumped overnight by as much as 20 cents a gallon at some Bay Area stations. Prices will likely exceed all-time state records set in 2008, according to an AAA spokeswoman.
(Kirstina Sangsahachart/ Daily News)

Q: Why will the state gas tax increase 5.6 cents per gallon on July 1? The closest answer I can find only left me confused.

Irvin Dawid, Burlingame

A: It should. Under a complicated “tax swap” in 2010, the 7.25 percent sales tax on gasoline was repealed that eliminated all but 2.25 percent of the sales tax, most of which goes to public safety, local health and social service programs and city and county operations.

But the tax swap added a second, price-based, excise tax of 17.3 cents per gallon for a total of 35.3 cents per gallon. The trade-off was intended to raise about the same amount of money as the old system but since the new excise tax component is based on the price of gas, it is adjusted each July to retain revenue neutrality.

At first, the price-based excise tax was slowly raised as pump prices increased, with the combined tax hitting 39.5 cents in 2013. But this dropped as gas prices dropped. In 2014, the combined taxes were reduced to 36 cents, cut again in 2016 to 27.8 cents, and raised to 29.7 cents in 2017, when gas prices bumped back up.